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Spengler

Chaos or Corruption in Egypt?

October 17th, 2011 - 1:31 pm

Today’s “Spengler” column at Asia Times Online asks whether the generals are stealing Egypt. Applying Occam’s Razor to the welter of contradictory economic reports out of that unfortunate country, the simplest explanation is that the military leadership is complicit in looting what is left of the Egyptian economy. The dismissal of all the outside directors of Egypt’s central bank on Oct. 16 suggests that the Supreme Council of the Armed Forces doesn’t want witnesses.

An excerpt:

Egypt’s trade deficit last year rose to US$26 billion, with exports at $23 billion and imports at $49 billion, according to Mahmoud Abdul Hai, a consultant to Egypt’s National Planning Institute, the news site Youm7 reported on September 26. That would put Egypt’s trade deficit at a stunning 15% of gross domestic product (GDP). The central bank’s website, by contrast, reports that the deficit during the six months through July ran at an annual rate of 9% of GDP.

The central government probably has lost the capacity to count foreign trade flows accurately. A great deal of capital flight occurs through fraudulent invoices for imports as well as black-market exports of tradable commodities. The Egyptian press from time to time runs exposes of smugglers stealing rice, or fertilizer, or diesel fuel for sale to foreign buyers, although aggregates are hard to trace.

If Mahmoud Abdul Hai of the planning institute is correct, his country’s exports have fallen from to $23 billion from $29 billion in 2009. If true, part of the decline probably represents disguised capital flight.

Kleptocracy on this scale implies a social breakdown of Somalian proportions.

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